You might associate antitrust lawsuits with industry titans like Microsoft, Visa and Mastercard, but the Department of Justice chases after small fry too. Today, it launched an action against Bazaarvoice, a relatively low-key social media marketing company that went public in February 2012.

Bazaarvoice does what thousands of other small companies claim to do, helping businesses make use of social media to better connect with their markets. It was bigger than than most though, working with companies like Best Buy, AT&T and Macy’s to set up customer review and discussion features on their websites. It earned $39 million in revenues in its most recent quarter, up 54%.

WASHINGTON – The Department of Justice filed a civil antitrust lawsuit today against Bazaarvoice Inc. challenging the company’s June 2012 acquisition of PowerReviews Inc. The department said that the $168.2 million transaction substantially lessened competition in the market for product ratings and reviews platforms in the United States, resulting in higher prices and diminished innovation.

The department’s lawsuit, filed in the U.S. District Court in the Northern District of California, in San Francisco, seeks to restore the competition that was extinguished by the transaction.

Bazaarvoice’s acquisition of PowerReviews was not reported under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which requires companies to notify and provide information to the department and the Federal Trade Commission before consummating certain acquisitions. The department began its investigation shortly after the transaction closed.

“Bazaarvoice bought PowerReviews knowing that it was acquiring its most significant rival and hoping to benefit from diminished price competition,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “Without competitive pressure from PowerReviews, Bazaarvoice will be able to increase prices to retailers and manufacturers for its product ratings and reviews platform. This lawsuit seeks to prevent one firm from dominating the product rating and review platforms market, and demonstrates that transactions that are not reported to us are not immune from scrutiny.”

Bazaarvoice replied to the charge with this statement (emphasis ours):

“We are disappointed with the filing of today’s lawsuit. We provided the DOJ with extensive documents, data, and information demonstrating that our acquisition of PowerReviews was procompetitive and did not result in a lessening of competition. We spent more than six months explaining that there is robust and ample competition in the market for social commerce engagement tools. We disagree with the DOJ’s decision to ignore that evidence and we will now shift our attention to a court of law where we expect to be fully vindicated.”

The DOJ complaint describes Bazaarvoice as the “dominant commercial supplier of product ratings and reviews platforms in the United States,” claiming that by purchasing its competitor it removed a crucial source of price competition.

Silicon Valley is a pretty dynamic place, and social media consultancies are dime a dozen, so exactly how difficult it would be for another company to offer these kind of services will be a big question as the case moves forward. While it would be very hard to find another company to compete with Visa and Mastercard — just like it was hard to find one to compete with Microsoft in the 1990s — the whole marketplace for social media services seems pretty vibrant these days.

That doesn’t mean Bazaarvoice didn’t crow about snuffing out a competitor. According to the DOJ, its case included comments like this from the company’s management:

- One of the company’s co-founders noted that the acquisition of PowerReviews would “[e]liminat[e] [Bazaarvoice’s] primary competitor” and provide “relief from [] price erosion;”

- The company’s current chief executive officer wrote that Bazaarvoice had “literally, no other competitors” beyond PowerReviews; and

- The company’s former chief executive officer projected that, as a result of the transaction, Bazaarvoice would have “[n]o meaningful direct competitor.”

Comments (5 of 8)

[...] Thursday the Department of Justice announced it was launching antitrust proceedings against Bazaarvoice, a social media marketing company based in Austin, [...]

9:13 am January 14, 2013

Not surprised wrote:

Just another example of the Obama administration's pro-business tilt. No wonder our economic recovery is just roaring.

Oh wait...

12:43 am January 12, 2013

Andy wrote:

This just doesn't make any sense at any level!

Such a waste of tax payer money - DOJ must be having more budget then it needs. More reason why the sequester cuts should be carried through!. How can DOJ justify going after such a small player who has one niche product with a limited feature (user review management) of social media marketing - which itself is a smaller portion (though fast growing) of the software products used by companies for marketing purposes.

Wonder whether a Obama political appointee/a donor is using their DOJ connections as a tool to get at this company management/investors.

11:28 am January 11, 2013

Steve wrote:

Nice work DOJ.....go after a small innovative company that provides hundreds of jobs in a market they created. Reminds me of the big fat looser bully who only picks on small kids.......

The dimwits at DOJ apparently cannot google "ratings and reviews software"...yes lots of options. The REASON companies choose BV is for the additional services and data analysis they provide. Welcome to 2013 where innovation and success are punished....

10:04 am January 11, 2013

Whatever wrote:

Not to mention there's tons of other companies already doing ratings and reviews. Like eBay, Amazon, Sears, etc... If it was so hard to enter the market, how come private companies are able to do build it themselves right and left?